CMS Issues the CY2016 Proposed Physician Fee Schedule: the First Proposed Adjustments Following the SGR Repeal

On July 8, 2015, the Centers for Medicare & Medicaid Services (“CMS”) released the proposed Medicare Physician Fee Schedule (“PFS”) for CY 2016 (“Proposed Rule”). The Proposed Rule—which is the first released following the repeal of the Sustainable Growth Rate (“SGR”) formula[1]—calls for a 0.5% increase in physician payments starting on January 1, 2016 and, more broadly, begins implementing the new payment system for physicians and other practitioners—the Merit-Based Incentive Payment System (“MIPS”). The Proposed Rule introduces significant policy changes and finalizes others already in the works to shift physician reimbursement to a system that rewards quality over quantity.[2]

As summarized below, the Proposed Rule proposes changes to the Physician Quality Reporting System, the Physician Value-Based Payment Modifier, and Medicare’s Physician Compare website. Additionally, it proposes two (2) new potential exceptions to the Stark Regulations and clarifications to existing exceptions to resolve common trouble areas identified via the Stark Self-Disclosure Protocol.

Physician Quality Reporting System (PQRS)

Starting in 2013, eligible professionals (“EPs”) and certain group practices were required to report quality measures to Medicare under the Physician Quality Reporting System (“PQRS”). Those EPs and group practices who failed to satisfactorily report PQRS data in 2013 will incur a 1.5% reduction in payments for services provided in 2015. Generally, the Proposed Rule reflects CMS’ intent to continue implementing the PQRS program by proposing 2018 payment adjustment criteria relatively equal to the 2017 payment adjustment criteria (even though the program is to be replaced by MIPS payment adjustments in 2019). As proposed, EPs and group practices reporting via ‘Claims and Registry’ must report at least nine (9) measures covering three (3) National Quality Strategy (“NQS”) domains or, if less than nine (9) measures apply, report on applicable measures for at least 50% of the Medicare Part B fee for service (“FFS”) patients seen during the reporting period to avoid a negative 2% payment adjustment in 2018. Alternatively, they may elect to participate satisfactorily in the Qualified Clinical Data Registry (“QCDR”).[3] Those EPs reporting less than nine (9) measures would be subject to the measure application validity (“MAV”) process—a separate review by CMS to determine if the EP should have reported quality codes for additional measures.[4] EPs who report via an EHR product or EHR data submission must report the same measures; but, if their EHR product contains patient data covering less than nine (9) measures, they must report on all measures for which there is data.[5]

CMS also clarified that EPs working at the following locations are not required to submit PQRS data: Rural Health Clinics (“RHCs”), Federally Qualified Health Centers (“FQHCs”), Independent Diagnostic Testing Facilities (“IDTFs”), and Independent Laboratories. Additionally, CMS proposed to modify the PQRS measures set by adding measures to cover identified gaps, eliminating duplicative measures, and replacing others with more robust measures. If finalized, the measure set will include three hundred (300) measures for 2016 and may require reporting data stratified by race, ethnicity, sex, primary language, and disability status.

physiciansPhysician Value-Based Payment Modifier (“VBPM”) Program

Under the VBPM Program, CMS uses a multiplier to adjust the total payments that an EP receives based on his or her past cost and quality scores and resulting ranking, relative to their peers. Specifically, CMS assigns a ‘composite quality score’ and ‘composite cost score’ to each physician or non-physician practitioner (“NPP”) based on the PQRS data he or she reported in a past ‘performance period’ and then ranks the provider relative to their peers into one (1) of six (6) tiers. Each tier is assigned a modifier (value-based payment multiplier) that CMS uses to adjust payments upward, downward, or not at all for services provided in a future calendar year. CMS began phasing in the VBPM Program in CY 2015, applying it to physician groups of one hundred (100) or more EPs under a single tax ID, with plans to expand it to groups of ten (10) or more EPs in CY 2016 and to all physicians in CY 2017. The program expires in CY 2018 as the MIPS Program begins.

In the Proposed Rule, CMS proposed the following key provisions:[6]

  • To use CY 2016 PQRS data to determine the CY 2018 modifier;
  • To apply the modifier only to the following NPPs: physician assistants (PAs), nurse practitioners (NPs), clinical nurse specialists (CNSs), and certified registered nurse anesthetists (CRNAs). Other NPPs are excluded;[7]
  • To continue to apply the CY 2018 Modifier based on PQRS participation and data;
  • To apply the quality-tiering methodology to all groups and solo practitioners who satisfactorily report PQRS data and fit in Category 1 of the CY 2018 payment adjustment period, yet hold groups consisting of only NPPs and solo NPPs harmless from downward adjustments in CY 2018;
  • Starting with CY 2017 payment adjustments, to waive the adjustment for any group or solo practitioner that has at least one EP who participated in the Pioneer ACO Model, CPCI, or other similar innovation center model during the performance period;
  • To keep the maximum upward adjustment factor as follows: (i) at + 4.0 for CY 2018 for groups of 10 or more EPs, (ii) at + 2.0 for groups of 2 to 9 EPs and solo physicians, and (iii) at + 2.0 for groups and solo practitioners consisting only of NPPs; and
  • To keep the maximum downward adjustment factor as follows: (i) at - 4.0 for CY 2018 for groups of 10 or more EPs, (ii) at -2.0 for groups of 2 to 9 EPs and solo physicians, and (iii) at -2.0 for groups and solo practitioners consisting only of NPPs.

Physician Compare Website Changes

In the Proposed Rule, CMS announced its intent to continue to publicly report data collected on physician performance on its website, “Physician Compare” (  In addition to the PQRS performance measures and demographic data already posted about each physician, CMS proposed to publicly report the following on Physician Compare:[8]

  • A green check mark next to each physician, NPP, or group practice that received an upward adjustment under the VBPM Program and a green check mark next to each quality program under which the physician, NPP, or group practice satisfactorily reported data to PQRS;
  • The names of all EPs who successfully participate in the Medicare Electronic Health Record (“EHR”) Incentive Program;
  • For each group, individual physician, and NPP, all PQRS measures provided across all reporting mechanisms (web interface, registry, and EHR);
  • The PQRS and non-PQRS measure data collected for each individual EP (and for group practices starting with CY 2016) who participated in the 2015 Qualified Clinical Data Registry (“QCDR”);
  • For each ACO participating in the Medicare Shared Savings Program (“MSSP”), all measures reported by the ACO for MSSP participation;
  • The performance rates on the four 2015 PQRS measures that individual physicians and NPPs reported in support of Million Hearts;
  • For each physician, NPP, and group, certain ‘Patient Experience of Care Measures’; and
  • A new 5 Star Rating System showing how physicians, NPPS, and groups rank on a series of established benchmarks relative to their peers, using PQRS performance data.

Physicians, NPPs, ACOs, and group practices will continue to be given a 30-day preview period to view how their measures will be reported on the website before publication. 

Stark Regulations / Self-Reporting Protocol Changes

CMS also proposed to establish two (2) new exceptions to the Stark regulations and proposed to clarify terminology used in existing exceptions, which CMS identified through the Stark Self-Disclosure Protocol as commonly generating confusion for providers.[9] In brief, the two (2) new proposed exceptions, if adopted, are:

  • Non-Physician Practitioner Recruitment Assistance Exception: CMS proposed this new exception to enable a hospital, FQHC, or RHC to provide recruitment assistance (remuneration) to physicians to assist them in employing a non-physician practitioner in the geographic area served by the hospital, FQHC, or RHC.[10] The exception would not apply to remuneration given to a group practice or other type of physician practice. The exception would be narrowly tailored in time and purpose to promote expanded access to primary care services. Consequently, “non-physician practitioner,” would be narrowly defined for this exception to include physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse midwives.
  • Exception for Timeshare Arrangements: CMS proposed this new exception to allow timeshare arrangements, which are structured as license arrangements, to use office space and other property and personnel of another (a licensor) that meet eight (8) enumerated criteria. Under the proposed exception, the licensor must be a hospital or physician organization. Other types of designated health services (“DHS”) entities, such as IDTFs and clinical labs, are specifically excluded from the exception due to CMS’ concern that they would be utilized to lock in referral streams.[11] Additionally, the leased premises must be primarily used for the evaluation and management of patients.[12]


1424896125530As discussed in our previous article, Stabilizing Physician Payment: H.R. 2 and Alternative Payment Models,[13] MACRA repealed the SGR methodology, revised the PFS update for 2015, established the Merit-based Incentive Program Systems (“MIPS”), and encouraged the creation of alternative payment models for physician services. To create a PFS which is consistent with MACRA, CMS is seeking input on numerous subjects, including, but not limited, to the following:

  • Input on the auditable, objective data needed to increase the accuracy of the values for global surgical services and the most efficient means of acquiring this data;
  • With respect to MIPS, (i) the factors to include, individually or in combination, to determine an appropriate low-volume threshold for excluding certain eligible professionals from the definition of a MIPS eligible professional; and (ii) the activities that could be classified as clinical practice improvement activities to determine composite performance scores under the MIPS; and
  • More broadly, input on criteria for and the structure of an effective alternative payment models for physicians.

Miscellaneous Other Changes:

  • Advanced Care Planning Services: CMS proposed to assign “active code” status to two (2) CPT codes for advanced care planning services (codes previously introduced by the Relative Value Update Committee covering conversations between patients and practitioners regarding end-of-life care).[14] By assigning “Active Code Status” to these CPT Codes, CMS has not made a national coverage determination to provide reimbursement for end-of-life services falling under these two (2) Codes; rather, CMS has left it to local contractors to make local coverage decisions. In the Proposed Rule, CMS is seeking comments on whether Medicare reimbursement should be offered for these services and if incentives are appropriate.
  • Incident To Services: For CY 2016, CMS is proposing to modify the ‘incident to’ billing requirements to require the physician or practitioner billing for ‘incident to’ services to also serve as the supervising physician or practitioner.[15]
  • EHR Incentive Payments: The Health Information Technology for Economic and Clinical Health Act of 2009, Public Law No. 111-5 (“HITECH Act”) and implementing regulations authorize incentive payments under Medicare and Medicaid for the adoption and meaningful use of certified EHR technology (“CEHRT”).[16] CMS proposes to revise the CEHRT definition for 2015-2017 to require that EHR technology is certified to report clinical quality measures (“CQMs”) in the format that CMS can electronically accept (referred to as CMS’ ‘form and manner requirements’) and also in accordance with criteria proposed by HHS’ Office of the National Coordinator for Health Information Technology (the ‘Quality Reporting Document Architecture Standards’).
  • Telehealth Services: CMS proposed to add the following services to the CY 2016 list of telehealth services eligible for Medicare reimbursement: behavioral health services (CPT codes 99356 and 99357) and end-stage renal disease related-services (CPT codes 90963, 90964, 90965, and 90966) but did not propose to add various other services to the telehealth list.[17] The rejected services include CPT codes for (i) medication therapy management services, (ii) chronic care management services, (iii) online evaluation and management services, (iv) critical care evaluation and management of the critically ill or critically injured patient, and (v) all evaluation and management services, telerehabilitation services, and palliative care, pain management and patient navigation services for cancer patients. Additionally, CMS proposed to revise the Medicare telehealth reimbursement regulations to permit CRNAs to furnish telehealth services as distant site practitioners; currently, Medicare will not reimburse for telehealth services provided by CRNAs.[18] This revision, if adopted, would permit physicians to send CRNAs to a patient’s location to provide the telehealth services and receive Medicare reimbursement for the services as long as the services fall within the CRNA’s scope of licensure under applicable state law.[19]

[1] Medicare Access and Chip Reauthorization Act of 2015, H.R. 2, 114th Cong. (1st Sess. 2015) (“MACRA”), commonly referred to as the ‘Doc Fix Bill.’

[2] Press Release: CMS Begins Implementation of Key Payment Legislation: Proposed Update to Physician Fee Schedule is First Since Repeal of SGR (July 8, 2015) available here.

[3] Proposed Rule at 412 through 414.

[4] Proposed Rule at 413.

[5] Proposed Rule at 415.

[6] Proposed Rule at 397; See supra Endnote ii.

[7] Proposed Rule at 399.

[8] See supra Endnote ii.

[9] Due to the large number of clarifications proposed by the rule, they are not discussed in detail here.

[10] Proposed Rule at 608 through 620.

[11] Proposed Rule at 650.

[12] Proposed Rule at 649 through 653.

[13] See here.

[14] Proposed Rule at 246.

[15] Proposed Rule at 289 through 294.

[16] Proposed Rule at 507.

[17] Proposed Rule at 280 through 288.

[18] Proposed Rule at 288.

[19] Proposed Rule at 288.

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